Darling soaks the rich with election budget

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Indy Politics

Alistair Darling turned the screw on the better off today as the battle lines were drawn for the General Election.

In his final Budget before polling, the Chancellor announced help for first time home buyers and young jobless people.

But he also unveiled a series of measures that will hit wealthier people, saying: "I believe those who have benefited the most from the strong growth in incomes in past years should now pay their fair share of tax."

Mr Darling confirmed that the threshold for residential property stamp duty would double from £125,000 to £250,000 from midnight tonight.

But to cheers from Labour MPs he also announced that the move would be funded by an increase in stamp duty to 5% for residential property over £1 million from April next year.

There was further bad news for higher earners - already facing a 50% tax rate on earnings over £150,000 - when Mr Darling announced the end of some personal allowances.

He said that for people with incomes over £100,000 a year - the top 2% - the value of their personal allowances would gradually be removed.

He also said tax relief on pensions will be restricted from next year, but again only for those with incomes above £130,000 a year.

And the Chancellor said he was freezing the inheritance tax threshold for another four years to help pay for the costs of care for older people.

Conservative leader David Cameron dismissed the package, saying: "Labour have made a complete mess of the British economy and they have done nothing to clear it up."

He added: "They have doubled the national debt and on these figures they are going to double it again."

And taunting Gordon Brown, Mr Cameron said: "The biggest risk to the recovery is five more years of this Prime Minister."

But the Tories faced an awkward moment when Mr Darling announced a deal to clamp down on tax avoidance in three countries including Belize, where Tory deputy chairman Lord Ashcroft is based.

He said: "We expect these deals to be signed within a few days - which is rather quicker than the 10 years it's taken the front bench opposite to exchange information with the deputy chairman of their party."

The announcements affecting the better off are likely to be seen as part of Labour's election strategy, with the Tories - still seen by some as the party of the privileged - being challenged to oppose the moves.

Justifying the measures, the Chancellor told MPs: "Looking across all the tax rises since the beginning of this global crisis, 60% of them will be paid for by the top 5% of earners.

"We have not raised these taxes out of dogma or ideology. We are determined to ensure our overall tax regime remains competitive."

There was limited good news for motorists, who are already facing soaring fuel costs.

Mr Darling said he would stagger next month's scheduled increase in fuel duties - with the tax rising by a just a penny in April with another penny in October and the final instalment of 0.76p in January next year.

There were no shocks in general for drinkers and smokers.

Duty on beer, wine and spirits will increase as planned from midnight on Sunday. Alcohol duties will also increase by 2% above inflation for two further years from 2013.

Tobacco duty will increase from today by 1% above inflation and then increase by 2% in real terms each year until 2014.

But for cider drinkers Mr Darling announced a 10% duty rise above inflation from midnight on Sunday.

And he said that in September changes will be made to the definition of cider to ensure specific strong ciders are taxed more appropriately.

Mr Darling said that stronger than expected tax receipts meant that Government borrowing would be £167 billion this year - £11 billion down on the £178 billion he predicted in the Pre-Budget Report (PBR) in December.

He said that the debt would continue to fall faster than previously forecast - dropping to £74 billion in 2014-15, down £8 billion on his earlier prediction.

The Chancellor said that he was standing by his forecast that the economy would grow by 1 to 1.5% this year although he slightly downgraded his prediction for next year to 3 to 3.5% compared to the 3.5% in the PBR.

Mr Darling set out plans to move 15,000 civil servants out of London as part of the efficiency savings the Government will need to achieve to manage down the debt.

He said he was ordering the part-nationalised banks, Lloyds and Royal Bank of Scotland, to extend an additional £94 billion in lending to businesses.

The Chancellor announced a £2 billion "green" investment fund to finance projects such as wind farms and other renewable energy sources.

For younger workers - who have been particularly hard hit by rising unemployment - the Chancellor extended the guarantee of a job or training for every 18 to 24 year-old after six months out-of-work.

This was to run until March next year but Mr Darling said that because unemployment had been lower than forecast, the cost had been lower than expected.

He went on: "I have therefore decided to use the money saved to extend our guaranteed offer to young people until March 2012."

He also confirmed a guarantee that everyone can have a basic bank account - a move designed to combat financial exclusion

He said the measure would mean, over the next five years, up to a million more people will have access to bank accounts.